M5011 Accounting for Management Report Sample
Required:
1. Write a consultation report for Company A
(1) Choose two companies from the list of Selected ASX Listed Companies, which is provided as a separate file under Assignment on the course website. One company will be Company A and the other will be used as a benchmark for analysis against Company A.
a) The name of the company selected as Company A should begin with the same letter of the alphabet as your first name (or your fellow student’s first name should you do the assignment in pairs), e.g. if your first name is Alpha, you can use Alterra Ltd or Australian Vintage Ltd.
b) The name of the company selected as the benchmarking company should begin with the same letter of the alphabet as your surname (or your fellow student’s surname should you do the assignment in pairs), e.g. if your surname is Beta, you can use Bega Cheese Ltd or Broo Ltd.
Note: If you cannot find an appropriate company when following the above selection rules, you may randomly select a company from the list. However, you need to clearly state the reason for the selection you make in your assignment.
(2) After selecting the companies, go to the company information database DatAnalysis Premium via the UniSA Library website. Under Company Reports, search for the companies you selected according to their ASX Codes or part of the companies’ names. Next, go to Financial Data to review these companies’ financial statements for the financial years from 2020 to 2022 (If 2022 data are not available for the companies chosen, you can use data from 2019 to 2021).
(3) Based on the available data, calculate three years’ (2020-2022) financial ratios of Company A and the benchmarking company selected. Based on these ratio results, analyse and compare the financial performance of these two companies. Your calculation and comparative analysis should focus on any two of the following four points (provide an explanation on why you choose these two):
a) Which company is more profitable and generates healthier returns?
b) How well are the two companies managing their resources? Do you think Company A is efficient in managing its assets compared with the benchmarking company?
c) Can Company A meet its short-term debts? How is its liquidity compared with the benchmarking company?
d) Do you think Company A will stay in operation in the long term? How is its long-term financial stability compared with the benchmarking company?
Your answer should be supported by sufficient evidence (i.e. financial statement data and/or ratio results) and analysis. You can also review the annual reports of the two companies for the last three years (Annual Reports are available to download in DatAnalysis Premium), and use the information disclosed in these reports to complement your answers. For example, whether there are issues of concern mentioned in the annual reports that can have an implication on Company A’s financial health and risks and how this might influence your comparative results.
(4) Go to the benchmarking company’s website and investigate whether and how it reports information about sustainability issues, such as carbon emissions, energy consumption, or community contributions, in its annual reports or stand-alone sustainability, CSR (corporate social responsibility), or environmental reports. Do you think Company A should follow what the benchmarking company is doing? Has Company A reported sustainability information? Do you support the view to increase sustainability reporting by Company A, or do you think the company should prioritise profit growth? Explain your views.
Report format:
a) Your consultation report must be presented in a clearly structured format, including a title page, a short executive summary, an introduction, the main body of text, a conclusion, a reference list, and relevant appendices. The report should contain correct grammar, expression and in-text referencing. Please read the Writing Reports Guide, and Good and Bad Examples of writing ratio analysis on the course Learnonline website before submission.
b) The word limit for this report is 2400 words (including all tables, figures, diagrams, references and appendices). Please show the word count on the cover page.
c) Please note you are expected to present only the summary of the ratios in the main body of the text. Detailed workings and calculations of ratios must be presented in the appendix of this report.
d) You are required to use APA 7 referencing style (Referencing style information is available here). The minimum number of references for this report is four (excluding the textbook and reference to annual reports). The references used must be based on proper scholarly sources (books, book chapters, journal articles, etc.). Internet sources, such as Wikipedia or Investopedia, are not scholarly, and thus deemed to be unacceptable. If you are not sure about the referencing style, please read the Referencing guide on the course Learnonline website.
Solution
1. Introduction
The report will provide an analysis of the organizations namely Happy Valley Nutrition Ltd. and Pure Food Tasmania Ltd based on the financial and non-financial performance of the organizations. Non-financial. Happy Valley Nutrition Ltd. and Pure Food Tasmania Ltd will be addressed as Company A and Company B, respectively for the ease of analyzing the report. The report will provide an analysis comparison of the financial position of the organizations for the years 2020 to 2022. The report will mainly focus on the liquidity and profitability aspects of the organizations for analysis. Lastly, the report will provide an analysis of the non-financial aspects, which provides a significant impact on the performance of the organization over the period. The report will further provide the sustainability coefficient of the organization based on financial and non-financial performance.
2. Main Body
2.1 Ratio Analysis
Liquidity Ratio
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Table 1: Liquidity Ratio
(Source: Self-created)
The liquidity ratio for university assignment help the management of the organization, shareholders, and other potential investors present in the market to understand the potential of the organization to meet its short-term liabilities and debts by using its current assets (Alkhyeli et al., 2021). The ratio of liquidity helps the stakeholders to identify the potential of the organization and the business conducted by the organization to efficiently convert the assets of the organization to raise capital and meet its debt obligation. However, based on the comparison of the current ratio of the organizations, Company B may have a better position to meet its current liabilities and debts from the current assets generated from the conduction of the business activities and transactions. Moreover, the current ratio of Company B may have significantly improved over the period and is consistent in mainmaintainingustainable the ratio.
Moreover, the cash ratio represents the potential of the organization to meet its current debts and liabilities over the period from the cash generated from the business activities and transactions (Olayinka, 2022). Based on the cash ratio analysis provided in Table 1, it may be identified that Company B may have better cash ratio metrics than Company A. Company B is also able to maintain a consistent cash ratio over the period, which indicates that the organization is conducting its business activities and transactions in an optimum manner.
Profitability Ratio
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Table 2: Profitability Ratio
(Source: Self-created)
The profitability ratio helps the management of the organization, shareholders, and other potential investors present in the market to understand the potential of the business to earn profit from the revenue generated over the period after meeting its operating expenses and other expenses that are required to conduct the operations of the business in an optimum manner (Akbar, 2021). As per the information provided in Table 1, Company A represents a negative operating ratio over the year, which indicates that the organization is unable to generate profit after meeting its expenses. On the contrary, Company B represents a positive operating margin ratio, which shows that the organization can generate profit after meeting all the expenses required to conduct the business in an optimum manner. Moreover, it may represent that the organization is conducting its operation in an optimum manner, which is helping the organization generate revenue over the period (Lacombe, 2021).
The performance of the ROE metrics of Company A is negative over the period, which may indicate the shareholders and investors may not generate enough revenue on the capital invested in the business over the period. However, the ROE metrics of Company B also represent a negative metric but the metric represents a significant and consistent improvement over the period. Therefore, the metrics of ROE are more promising in the case of Company B that the metrics represented by Company A
Leverage Ratio
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Table 3: Leverage Ratio
(Source: Self-created)
The leverage ratio represents the ability of the organization to meet its financial obligation from the assets and equity generated from the conduction of the business activities and transactions (Perszyk, 2021). The debt ratio helps the stakeholders to identify the factors that are necessary to meet the debt obligation of the business by the total assets present with the organization. Table 3 represents the Debt ratio comparison of both organizations as considered in the report. In the case of both organizations, the debt ratio represents a consistent increase in the metrics from the previous period for three consecutive years. Furthermore, the interest coverage ratio represents the potential of the business to deliver interest to the stakeholders based on profit generated by the organization from the conduction of the business activities and transactions.
Table 3 represents the Debt ratio comparison of both organizations as considered in the report, which indicates that Company B has a better interest coverage ratio than Company A. This may further enable the organization to safeguard the interest of the stakeholders and attract more shareholders and investors over the period.
Working Capital Ratio
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Table 4: Working Capital Ratio
(Source: Self-created)
The working capital ratio may represent the extent to which the organization may be able to meet its working capital ratio over the assets and income generated from the conduction of business activities and transactions (Torkashvand et al., 2021). As per the information represented in Table 4, it may be concluded that Company B is a better place to meet its total current liabilities, from the income generated from the business activities over the period. Moreover, the accounts receivable days and the accounts payable days are significantly better with consistent improvement in the respective metrics in the case of Company B than Company A. However, the inventory days of Company B is much better than Company A, which represents the effective and efficient conduction of the business activities and transaction over the period.
The working capital ratio further helps the stakeholders of the organization to understand the flow of cash and the position of the cash flow statement present in the organization over the period (Lukic, 2021). A positive cashflow statement and cash inflow from the business operations always attract shareholders and other potential investors in the market to make decisions regarding the investment of their capital in the business activities and projects.
Valuation Ratio
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Table 5: Valuation Ratio
(Source: Self-created)
The valuation ratio represents the metrics of the relationship that exists between the market value of the organization with the actual financial position of the organization over the period (Debnath et al., 2023). Table 5 represents the comparison of the organizations as considered in the report based on valuation ratios. As per the comparison, it may be indicated that both organizations represent negative earnings per share ratio over the period. However, both organizations have been consistently improving their EPS ratio over the period. The organizations considered in this report do not pay a dividend to their shareholders but the book value per share of Company B represents a consistent improvement in the value of the share held by them.
Therefore, from the analysis of the financial position of both organizations as considered in the report, it may be concluded that Company B holds a much better financial position over the period than Company A. Furthermore, the financial position of any B may be considered to be consistently improving the financial metrics and position over the consecutive period. Thus, Company B may have better potential to deliver healthier returns to the shareholders and the investors holding the shares of the organization than Company A. Moreover, Company A may require to develop and implement a strategy and framework to improve the activities and transactions of the business, which may in turn enhance the financial position of the business and improve the revenue generated over the period. The management of Company A may further formulate and implement cost-effective strategies, cost leadership, and differentiation strategies to improve their business position in the market and further improve their performance over the period.
This may also help the organization to increase the generation of revenue, which may in turn help the organization to gradually earn profit over the period. Thirdly, the short-term debt capability of Company A may be in a position to meet its current debt obligation but the management of the organization may require to improve the liquidity ratios. Improving the liquidity ratio may help the organization to efficiently and effectively meet the current debt liabilities over the period and further help the organization gain the attention of the shareholders and other potential investors in the market to make important decision-making activities over the period. This may further help the organization to enhance the cash flow position of the present in the organization. The liquidity position of Company A may be stated as poor in comparison to Company B.
Lastly, the present financial position and the business structure of Company A may represent that the organization may not be able to sustain itself over the long-term period. This is because the organization has a negative valuation ratio analysis as per the data represented in Table 5. Furthermore, the organization may not earn enough profits from the conduction of the business activities and transactions, which does not allow the organization to pay dividends and interest to the shareholders of the organization over the period. On the contrary, the organization has shown a significant improvement in the metrics of EPS over the three consecutive periods, which represents a positive image of the organization that may sustain itself in the long run. The management of Company A may further formulate and implement cost-effective strategies, cost leadership, and differentiation strategies to improve their business position in the market and further improve their performance over the period.
2.2 Sustainability Reporting
The benchmark company, which is Company B as considered in the report may be considered to have the vision to contribute value to the economy, society, and environment of the nation. The organization may primarily focus on the aspects of maintaining transparency and trust in the event of the conduction of business activities and transactions with the stakeholders of the organization (Hatefi, 2019). This helps the business to gain the confidence of the stakeholders in the business, which may enable the organization to further enhance the efficiency of the business operation and improve the revenue generated over the period, which may also help the organization to enhance and promote the brand presence in the market, which may enable them to become the primary preference of the consumers in the market.
The organization further developed a strategy and framework to maintain independence and freedom regarding editorial content, which may enable the organization to meet the interest of the shareholders and investors over the period (Stanley, 2020). This also enables the organization to provide a platform to the investors and the shareholders to express their views and ideas for further improvement of the business activities and transactions. Furthermore, Company A must adopt a transparency policy and offer a content freedom platform to gain the trust of the stakeholders in the market, which may enhance the business performance.
3. Conclusion
The report provided an analysis comparison of the financial position of the organizations for the years 2020 to 2022. The report mainly focused on the liquidity and profitability aspects of the organizations for analysis. Lastly, the report provided an analysis of the non-financial aspects, which provides a significant impact on the performance of the organization over the period. The report further provided the sustainability coefficient of the organization based on financial and non-financial performance. Therefore, from the above analysis of the financial and non-financial position of the organization, it may be concluded that Company B is in a better position than Company A, in every aspect.
4. Reference
Akbar, A., Akbar, M., Nazir, M., Poulova, P., & Ray, S. (2021). Does working capital management influence the operating and market risk of firms? Risks, 9(11), 201 https://www.mdpi.com/1348618
Alkhyeli, S., Abdulla, F., Alshehhi, A., Aldhaheri, N., Alhosani, M., Alsereidi, A., ... & Nobanee, H. (2021). Financial Analysis and Performance Evaluation of Pfizer. Available at SSRN 3896385 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3896385
Debnath, B., Bari, A. M., Haq, M. M., de Jesus Pacheco, D. A., & Khan, M. A. (2023). An integrated stepwise weight assessment ratio analysis and weighted aggregated sum product assessment framework for sustainable supplier selection in the healthcare supply chains. Supply Chain Analytics, 1, 100001 https://www.sciencedirect.com/science/article/pii/S2949863522000012
Hatefi, M. A. (2019). Indifference threshold-based attribute ratio analysis: A method for assigning the weights to the attributes in multiple attribute decision-making. Applied Soft Computing, 74, 643-651 https://www.sciencedirect.com/science/article/pii/S1568494618306240
Lacombe, R. S., & Bazinet, R. P. (2021). Natural abundance carbon isotope ratio analysis and its application in the study of diet and metabolism. Nutrition reviews, 79(8), 869-888 https://academic.oup.com/nutritionreviews/article-abstract/79/8/869/5952898
Lukic, R., & Hadrovic Zekic, B. (2021). Evaluation of transportation and storage efficiency in Serbia based on RATIO analysis and the OCRA method. In Proceedings of the 21 Th International Scientific Conference Business Logistics in Modern Management October (pp. 7-8) http://www.efos.unios.hr/repec/osi/bulimm/PDF/BusinessLogisticsinModernManagement21/blimm2111.pdf
Olayinka, A. A. (2022). Financial statement analysis as a tool for investment decisions and assessment of companies’ performance. International Journal of Financial, Accounting, and Management, 4(1), 49-66 https://goodwoodpub.com/index.php/ijfam/article/view/852
Perszyk, R. E., Kristensen, A. S., Lyuboslavsky, P., & Traynelis, S. F. (2021). Three-dimensional missense tolerance ratio analysis. Genome Research, 31(8), 1447-1461 https://genome.cshlp.org/content/31/8/1447.short
Stanley, C. R. (2020). Molar element ratio analysis of lithogeochemical data: a toolbox for use in mineral exploration and mining. Geochemistry: Exploration, Environment, Analysis, 20(2), 233-256 https://pubs.geoscienceworld.org/geea/article/571950/molar-element-ratio-analysis-of-lithogeochemical
Torkashvand, M., Neshat, A., Javadi, S., & Yousefi, H. (2021). DRASTIC framework improvement using stepwise weight assessment ratio analysis (SWARA) and a combination of genetic algorithm and entropy. Environmental Science and Pollution Research, 28, 46704-46724 https://link.springer.com/article/10.1007/s11356-020-11406-7
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